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Inflation's Children: Tales of Crises That Beget Reforms

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  • Bruno, Michael
  • Easterly, William

Abstract

Are broad reforms the children of high inflation? Do growth recoveries follow? We find that countries that had external debt crises with high inflation both reformed more and recovered better than countries that had external debt crises with low inflation. Countries with extremely high inflation also later wound up with lower inflation than countries that has moderately high inflation. The low inflation debtor countries had more aid than the high inflation debtor countries, which may have created stronger incentives to reform in the high inflation countries. Recent reforms look like they are the children of high inflation, even if further paternity tests are in order.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 86 (1996)
Issue (Month): 2 (May)
Pages: 213-17

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Handle: RePEc:aea:aecrev:v:86:y:1996:i:2:p:213-17

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References

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  1. Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
  2. Mariano Tommasi & Andres Velasco, 1996. "Where are we in the political economy of reform?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 187-238.
  3. Allan Drazen & Vittorio Grilli, 1990. "The Benefits of Crises for Economic Reforms," NBER Working Papers 3527, National Bureau of Economic Research, Inc.
  4. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  5. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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Cited by:
  1. Loayza, Norman & Palacios, Luisa, 1997. "Economic reform and progress in Latin America and the Caribbean," Policy Research Working Paper Series 1829, The World Bank.
  2. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When? On the Political Economy of Reforms," NBER Working Papers 12049, National Bureau of Economic Research, Inc.
  3. Jan Fidrmuc & Ariane Tichit, 2012. "How I Learned to Stop Worrying and Love the Crisis," CESifo Working Paper Series 3720, CESifo Group Munich.
  4. Allan Drazen, 1997. "Towards a Political-Economic Theory of Domestic Debt," NBER Working Papers 5890, National Bureau of Economic Research, Inc.
  5. Athanasios Vamvakidis, 2007. "External Debt and Economic Reform," IMF Working Papers 07/50, International Monetary Fund.
  6. Henry, Peter B. & Arslanalp, Serkan, 2003. "Is Debt Relief Efficient?," Research Papers 1837, Stanford University, Graduate School of Business.
  7. Henry, Peter B., 2000. "Is Disinflation Good for Growth?," Research Papers 1657, Stanford University, Graduate School of Business.
  8. Abdul Abiad & Ashoka Mody, 2005. "Financial Reform: What Shakes It? What Shapes It?," American Economic Review, American Economic Association, vol. 95(1), pages 66-88, March.
  9. VĂ­tor Castro, 2003. "The Impact of Conflicts of Interest on Inflation Stabilization," NIPE Working Papers 8/2003, NIPE - Universidade do Minho.
  10. Serkan Arslanalp & Peter Blair Henry, 2002. "Debt Relief: What Do the Markets Think?," NBER Working Papers 9369, National Bureau of Economic Research, Inc.
  11. Henry, Peter B., 2001. "Is Disinflation Good for the Stock Market?," Research Papers 1681, Stanford University, Graduate School of Business.
  12. Degol Hailu, 2007. "Scaling-up HIV/AIDS Financing and the Role of Macroeconomic Policies in Kenya," Conference Paper 4, International Policy Centre for Inclusive Growth.
  13. Sebastian Edwards & Daniel Lederman, 1998. "The Political Economy of Unilateral Trade Liberalization: The Case of Chile," NBER Working Papers 6510, National Bureau of Economic Research, Inc.
  14. Falvey, Rod & Foster, Neil & Greenaway, David, 2012. "Trade Liberalization, Economic Crises, and Growth," World Development, Elsevier, vol. 40(11), pages 2177-2193.
  15. Englebert, Pierre, 2000. "Solving the Mystery of the AFRICA Dummy," World Development, Elsevier, vol. 28(10), pages 1821-1835, October.
  16. Pitlik, Hans & Wirth, Steffen, 2003. "Do crises promote the extent of economic liberalization?: an empirical test," European Journal of Political Economy, Elsevier, vol. 19(3), pages 565-581, September.

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